Thursday, December 19, 2019

FedEx's woes drag on the US equity market; will BoE announce its successor today?

Tags
  • China
  • Pound
  • Stocks
  • Bank of Japan
  • Bank of England

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Market Recap: FedEx's woes drag on the US equity market; will BoE announce its successor today?

The DJIA and the S&P500 was dragged down by FedEx shares on Wednesday, after the logistics giant cut its profit forecast for 2020. FedEx shares tumbled 10.03% after it forecasted a fall in profits for 2020 thanks to rising expenses, a global shift toward protectionist trade policies and its split from Amazon. But the Nasdaq managed to inch slightly higher on Wednesday thanks to gains from Tesla, Netflix and Facebook.

Indexes Change (%) Net Change Closing Price
Dow Jones -0.10 -27.88 28,239.28
S&P500 -0.04 -1.38 3,191.14
Nasdaq 0.05 4.38 8,827.73
*Source: Bloomberg

Sterling continues to remain under pressure as a no-deal Brexit remains a possibility going into 2020. The euro tracked the sterling’s losses on Wednesday as well, even as German business expectations improved in December. IFO’s Business Climate and Expectations survey rose to 96.3 and 93.8 from 95.0 and 92.1 respectively. Both survey figures beat economists’ forecast.

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Safe haven assets fell on Wednesday thanks to a stronger greenback. The improvement in the US economy on Tuesday put more downward pressure on probabilities for a Fed rate cut in 2020, pushing the dollar up higher on Wednesday. Gold, yen and US treasuries all fell. Benchmark 10-year yields gained 4bps to 1.92%.

Safe Haven Assets Change (%) Net Change Closing Price
Gold -0.06 -0.82 1,475.40
JPY -0.06 -0.07 109.55
*Source: Bloomberg
US Treasury yields Change (bps) Yield (%)
2-Year 0 1.62
10-Year 1 1.88
30-Year 2 2.30
*Source: Bloomberg

Asia stocks look set to track US losses on Thursday. The Nikkei started Thursday’s trading session 0.09% higher but fell later in the morning. The Straits Times Index opened 0.14% lower. In Japan, the BoJ is set to decide on monetary policy today at 11am (GMT +8). But the BoJ is likely to hold rates and rely on the recently announced fiscal stimulus to boost the Japanese economy before exploring monetary policy tools.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -0.18 -43.47 23,890.96 8:29:30 AM
Straits Times Index -0.23 -7.30 3,202.87 9:01:01 AM
Hang Seng Futures 0.08 22..00 27,939.00 2:59:56 AM
*Source: Bloomberg

BoE is unlikely to change its monetary policy later today. In the evening later today, the BoE will be announcing its decision on monetary policy at 8pm (GMT +8). Investors expect the central bank to hold, as overnight index swaps indicate only a 1.8% probability for a rate cut. The other key focus of today’s decision will be on BoE Governor Mark Carney’s successor, who will take over control of the central bank on 1st February 2020. Also, in the morning tomorrow at 9.30am (GMT +8), the PBoC will be deciding on its 1-year and 5-year loan prime rates.